Fair Value Measurements

The following table summarizes our investments in available-for-sale securities:



	September 30, 2014
	Amortized Cost Basis		Unrealized gain		Estimated Fair Value
Available-for-sale securities
Plaza Create Co. Ltd. common shares (1)	$	4,407	$	4,992	$	9,399
Total investments in available-for-sale securities	$	4,407	$	4,992	$	9,399



	June 30, 2014
	Amortized Cost Basis		Unrealized gain		Estimated Fair Value
Available-for-sale securities
Plaza Create Co. Ltd. common shares (1)	$	4,611	$	9,246	$	13,857
Total investments in available-for-sale securities	$	4,611	$	9,246	$	13,857

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(1) On February 28, 2014, we purchased shares in our publicly traded Japanese joint venture partner. Refer to Note 13 for further discussion of the separate joint business arrangement.

We use a three-level valuation hierarchy for measuring fair value and include detailed financial statement disclosures about fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:


•	Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.


•	Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.


•	Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables summarize our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:



	September 30, 2014
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Available-for-sale securities	$	9,399		$	9,399	$	—		$	—
Currency forward contracts	3,110			—		3,110			—
Interest rate swap contracts	102			—		102			—
Total assets recorded at fair value	$	12,611		$	9,399	$	3,212		$	—

Liabilities
Interest rate swap contracts	$	(264	)	$	—	$	(264	)	$	—
Currency forward contracts	(66		)	—		(66		)	—
Contingent consideration	(18,555		)	—		—			(18,555		)
Total liabilities recorded at fair value	$	(18,885	)	$	—	$	(330	)	$	(18,555	)



	June 30, 2014
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Available-for-sale securities	$	13,857		$	13,857	$	—		$	—
Currency forward contracts	382			—		382			—
Total assets recorded at fair value	$	14,239		$	13,857	$	382		$	—

Liabilities
Interest rate swap contracts	$	(745	)	$	—	$	(745	)	$	—
Currency forward contracts	(806		)	—		(806		)	—
Contingent consideration	(16,072		)	—		—			(16,072		)
Total liabilities recorded at fair value	$	(17,623	)	$	—	$	(1,551	)	$	(16,072	)

During the three months ended September 30, 2014 and the year ended June 30, 2014 there were no significant transfers in or out of Level 1, Level 2 and Level 3 classifications.

The valuations of the derivatives intended to mitigate our interest rate and currency risk are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. This analysis utilizes observable market-based inputs, including interest rate curves, interest rate volatility, or spot and forward exchange rates, and reflects the contractual terms of these instruments, including the period to maturity. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in the fair value measurement. However, as of September 30, 2014, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 in the fair value hierarchy.

Our fourth quarter fiscal 2014 acquisitions of People & Print Group and Pixartprinting provided for contingent consideration payable based on the achievement of certain financial results. For People & Print Group, the payment is contingent upon the achievement of an initial calendar year 2014 earnings before interest, taxes, depreciation and amortization (EBITDA) margin threshold but ultimately payable based on revenue and EBITDA performance for calendar year 2015. The Pixartprinting payment is contingent on the achievement of revenue and EBITDA performance for calendar year 2014.

The contingent consideration obligations are measured at fair value and are based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions and estimates to forecast a range of outcomes and probabilities for the contingent consideration. We assess these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Any changes in the fair value of contingent consideration related to updated assumptions and estimates will be recognized within general and administrative expenses in the consolidated statements of operations during the period in which the change occurs.

The following table represents the changes in fair value of Level 3 contingent consideration:



	Current liabilities: contingent consideration			Long-term liabilities: contingent consideration			Total contingent consideration
Balance at June 30, 2014	$	6,276		$	9,796		$	16,072
Fair value adjustment	3,096			581			3,677
Foreign currency impact	(496		)	(698		)	(1,194		)
Balance at September 30, 2014	$	8,876		$	9,679		$	18,555

As of September 30, 2014 and June 30, 2014, the carrying amounts of cash and cash equivalents, receivables, accounts payable, and other current liabilities approximated their estimated fair values. As of September 30, 2014, we performed an evaluation of the estimated fair value of our debt and determined that the fair value approximated the carrying value of the liability. As of June 30, 2014 the carrying value of our debt was $448,059 and the fair value was $460,098. Our debt is a variable rate debt instrument indexed to LIBOR that resets periodically. The estimated fair value of our debt was determined using available market information based on recent trades or activity of debt instruments with substantially similar risks, terms and maturities, which fall within Level 2 under the fair value hierarchy. The estimated fair value of assets and liabilities disclosed above may not be representative of actual values that could have been or will be realized in the future.